– Buying equity gets capital immediately into the banks.
– Protects upside potential for taxpayers.
Banks lobbied for the bailout where they can dump the bad debt onto the Federal govt without diluting shareholder’s equity.
There was also an element of wanting not to “appear” socialist. But the velocity of the crash was such that capital needs to be immediately injected into the failing banks.
Why should the govt buy the bad paper and let the bank get off scot-free? It’s much better to invest in the banks the Warren Buffet way.
